Wednesday, March 26, 2008
Wrong Again! Where’s Van Morrison When You Need Him?
XM, Sirius Move Closer To Improbable Merger
Justice Department Approves Joining Radio Companies; FCC Poses the Final Hurdle
By SARAH MCBRIDE and AMY SCHATZMarch 25, 2008; Page B1
The Justice Department approved the merger of satellite-radio companies Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc., leaving one more major regulatory hurdle -- the Federal Communications Commission -- before a deal that was given little chance of success a year ago can be completed.
—The Wall Street Journal
In our continuing look-back at previous efforts to Not Make Things Up, we can’t help but include what we got wrong along with what we got right, all efforts to shade our batting average to the good aside.
And a prediction we made almost exactly one year ago—that the Sirius/XM merger effort would come to naught—looks about as wrong as you can get.
It is hard to fathom what the Justice Department looked at in reaching the conclusion that the two companies “simply do not compete” in “several important areas,” including this howler from Thomas Barnett, the assistant attorney general for antitrust:
At retail outlets like Best Buy and Circuit City, where consumers can choose one service or the other, he said investigators couldn't determine that customers were limiting their decision to just the two companies and not also choosing among other audio-entertainment options.
Precisely what “other audio-entertainment options” a consumer is going to “choose” for one’s automobile when shopping at Best Buy is not clear—unless Best Buy now offers, say, Van Morrison to ride with you and sing “Brown Eyed Girl” while you commute.
In any event, here’s how we looked at it not much more than one year ago:
Monday, March 12, 2007
No Thought Experiments for Mel
Speaking before an antitrust task force of the House Judiciary Committee, Mr. Karmazin said he was shocked by the very idea that anyone would see a monopoly as the logical result of merging the only two satellite radio broadcasters. “There is no monopoly or duopoly,” he told the hearing. “That’s the most bizarre thing I have ever heard.”
—The New York Times
You can’t blame him for trying.
“Him” is Mel Karmazin, the uber-salesman currently attempting to sell the deal of a lifetime to the relevant authorities, i.e. the merger of the only two satellite radio companies in America.
And Mel is pulling out all the stops—going so far as to unload the following whopper on a rightly suspicious Congress:
Mr. Karmazin’s essential message is that satellite radio is competing with all forms of audio entertainment and information — from commercial radio to iPod jacks in cars to Internet radio….
Anybody ever try sticking a desktop PC in the car and tuning into Internet radio while you’re whaling down a crowded freeway?
And I suspect at the end of the day—this is my opinion only, and for what it’s worth—the XM/Sirius deal will not go through for precisely the same reason the Dish/Echostar deal did not go through.
Still, to test Mel's own theory, it might be helpful to perform what is called a “Thought Experiment.”
The thought is this: would the Feds allow a single terrestrial radio company—Clear Channel, say—to buy every radio station in America, thereby owning 100% of the terrestrial radio business?
If the answer is “yes, because of all those iPods and Internet radio stations out there,” then one could suppose the Feds might allow a single satellite company to own 100% of the satellite radio business.
But I don’t think Mel is going to encourage anybody at the FCC to be doing that kind of thought experiment any time soon.
© 2007 Not Making This Up LLC
I Am Not Making This Up
© 2008 Not Making This Up LLC
The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations. The commentary in this blog in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.
Posted by Jeff Matthews at 8:17 AM